Thousands of DVDs, which the federal government asserts are counterfeit, were seized Friday, Oct. 16 at PC Treasures, Inc. in Oxford Township when agents from U.S. Immigration and Customs Enforcement (ICE) executed a search warrant at the company’s 1795 N. Lapeer Rd. headquarters and warehouse.
But the owners of the local company that specializes in providing digital entertainment products deny any of their merchandise is counterfeit.
‘We really object to the use of the word counterfeit,? said Oakland Township resident Brian Austin, president and co-owner of PC Treasures. ‘This is not counterfeit merchandise. Counterfeit (means) you don’t have the right to the content that is on that DVD and we do have the rights. We have license agreements or it’s in the public domain. This is not counterfeit. We are not counterfeiters.?
According to a statement issued by ICE, more than 300,000 pieces of counterfeit merchandise were seized over the weekend at locations in Chicago and Detroit following an investigation that originated in Detroit.
‘The investigation, which began earlier this year, yielded intelligence regarding a major re-seller and on-line vendor of suspected counterfeit DVDs,? the statement read. ‘The merchandise, which was shipped from China into Chicago and destined for Detroit, was intercepted by U.S. Customs and Border Protection officers in Chicago earlier this month and discovered to contain suspected counterfeit merchandise.?
A subsequent investigation revealed the shipment contained counterfeit DVDs with a suggested retail price of $1.4 million, according to ICE.
‘Based on this information, ICE agents in Detroit conducted a controlled delivery of the items and subsequently served a federal search warrant seizing the merchandise over the weekend at a warehouse in Oxford, Michigan,? according to the statement from ICE.
Khaalid Walls, public affairs officer for ICE’s Detroit office, indicated the ‘bulk? of the DVDs were seized in Chicago. He said less than 10,000 discs, an approximate value of $40,000 to $50,000, were seized in Oxford.
According to ICE, no arrests were made, however, the investigation into this case continues.
Austin insisted the federal agency’s claim that the DVDs are counterfeit is ‘grossly inaccurate? and based on assumptions.
‘I think it really boils down to them not understanding our business,? he said. ?(Counterfeit) is a very offensive term to a business like us.?
Founded in 1998, PC Treasures specializes in providing consumer-focused digital entertainment products such as software, music, movies, audio books, children’s books and cell phone games. It’s warehouse contains millions of discs.
The company, which locally employs 32 full-time people and several part-timers, has both domestic and foreign partners that make products for them, like DVDs, which PC Treasures then sells to computer manufacturers, computer peripheral and accessory companies, television shopping channels, fund-raising organizations and leading drug, grocery, convenience, dollar, mass merchant and internet retailers.
According to Austin, all the DVDs seized by federal agents contain either content for which PC Treasures has license agreements and pays royalties, or content that’s in the public domain and is therefore available to free use such as old movies and TV shows.
‘Brian (Austin) has in his office two massive filing cabinets with licensing agreements for every single thing that is in this warehouse,? said Clarkston resident Les Thomas, who’s co-owner and vice president of marketing for PC Treasures.
‘We have license agreements in place with a wide array of software publishers, DVD Video publishers (and) other content holders of different types of digital entertainment,? Austin said. ‘We understand intellectual property and how to deal with intellectual property honorably and honestly and that’s how we built our business.?
Contrary to what the ICE stated, the DVDs do not have a $1.4 million retail value, according to Austin. ‘These are actually dollar DVDs,? he explained. ‘They’re going to be sold for $1 by retailers (such as drug stores), which means that our selling price is significantly less than that.?
Austin and Thomas claim this whole matter really boils down to a trademark issue that has absolutely nothing to do with counterfeiting.
The businessmen claim that unbeknownst to them, they received DVDs from the Chinese company they do business with that contained a particular trademarked logo on the back in extremely tiny print.
The text of the logo, which reads ‘DVD Video? is not trademarked, however, the design of the logo is protected.
‘The logo is owned by a group of Asian (DVD) replication houses,? Austin said.
Austin and Thomas claim they found out that one of the Chinese companies that makes DVDs for them purchased stamping equipment that contains the logo, which this company cannot legally use.
‘We did not put (the logo) there. We do not want it to be there,? Austin said. ‘The first time we found out about it was when the Customs officer showed it to us when they visited us on Friday. It’s a mistake by our partner and we’re paying a pretty expensive price for that.?
‘We receive absolutely no marketing benefit from that mark being on the DVD. It’s virtually invisible to the consumer. They would never even notice that it’s there,? Austin noted. ‘There’s no intent to use anybody’s logo or trademark or protected IP in any way other than we have permission to do and that’s how we built our business.?
Austin and Thomas indicated that if ICE would return their merchandise, they would be more than willing to ‘obliterate? the tiny logo at their company’s expense.
‘That way we can make the product good and everybody’s happy and we can fulfill our orders to our customers,? Thomas said.
‘We’re waiting to find out if they’ll allow us to do that,? Austin said. ‘It will be very costly and time consuming for us to do this process, if they allow us to do it, but we are all about customer satisfaction (and) long-term relationships. Whatever the expense is, we are willing to undergo it.?
The businessmen admitted they’re familiar with this type of situation with Customs because it’s happened to them twice before.
‘We learned the hard way about this trademark several years ago when we had a video product that was intercepted by Customs because it had that logo on there,? Austin explained. ‘We did not realize at the time that was not a free use trademark. We found out at great expense to PC Treasures because the product was seized and ultimately destroyed by Customs.?
After that, PC Treasures worked with Customs agents to come up with an acceptable ‘DVD Video? logo that contained the words, but not the trademarked design. That logo is now prominently displayed on the DVD jackets and discs sold by the company.
The other incident involved PC Treasures being provided some artwork by one of its publishing partners that contained the Dolby digital logo, another protected trademark.
Again, the use of the logo in that case was not intentional, according to Thomas.
‘We’re under scrutiny because of the first two incidents,? said Austin, explaining the reason behind the feds visit last week. ‘This is the third time and they have to look really hard to find that logo.?
Thomas and Austin said what people have to understand is that there’s a learning curve when it comes to dealing with Chinese companies.
‘There’s no book anywhere you can go to read step one, two, three about importing product from China,? Thomas said. ‘With regard to all the different things that you have to know, we’ve learned on the fly.?
‘We learned here (in this case) we better make sure the underside of the DVDs that we purchase don’t have that logo. Now we know,? Austin added. ‘It’s a very expensive lesson. We’re a small business and these lessons don’t come cheaply to us, but we do learn from them.?
‘We want to be cooperative (with Customs) and I hope they interpret this as another lesson that we’ve just learned as opposed to a deliberate attempt to have that little logo inserted on a DVD. That couldn’t be further from the truth,? Austin noted.